(Updates prices)

By Tom Westbrook

SINGAPORE, March 26 (Reuters) - Asian equities struggled

for traction on Tuesday as mixed messages from U.S. monetary

policymakers and a wobble in the Chinese yuan left traders

unsettled and tentative with Friday's release of U.S. inflation

data hanging over the outlook.

The risk of Japan intervening to prevent further falls in

the yen squeezed the dollar, however it rose against the yuan on

speculation that China may tolerate a weaker currency.

MSCI's broadest index of Asia-Pacific shares outside Japan

rose 0.3%, led by chipmaker gains for South

Korea's Kospi. Other markets lacked direction and

drifted either side of flat, with sentiment in China and Hong

Kong still fragile after Friday's sudden slide in the yuan.

Investors in Hong Kong were waiting on signs of support

for the property market and to see whether Friday's unexpected

fall in the yuan signalled a policy shift, said Steven Leung,

director of institutional sales at broker UOB Kay Hian.

Insurer AIA, down 17% in 10 trading days since the

company did not promise new buybacks in its results

announcement, highlighted the fragile mood.

Japan's Nikkei was steady as was the yen,

which last traded at 151.38 per dollar. S&P 500 futures

rose 0.1%. European futures were flat. FTSE futures

fell 0.3%.

On Monday, the mixed outlook from Federal Reserve officials

threw a few wildcards into the policy outlook while markets wait

on the next U.S. inflation indicators due on Good Friday.

Chicago Fed President Austan Goolsbee said he had pencilled

in three rate cuts this year, while Fed Governor Lisa Cook urged

caution and Atlanta Fed President Raphael Bostic re-iterated

Friday remarks trimming his expectations to one cut.

"Comments by FOMC participants suggest to us that four

voters - Bostic, Bowman, Mester, and Barkin - see zero, one or

two cuts this year," said Standard Chartered strategist Steve

Englander.

"We still think (chairman Jerome) Powell has eight votes for

easing, but he probably does not want an 8-4 vote on the first

cut of the cycle. Rather, he may hope that good inflation

outcomes will allow him to swing a couple of votes into the

cutting camp in the coming months."

YEN STEADY, YUAN SLIPPERY

U.S. interest rate futures price about three Fed rate cuts

this year and about a three-in-four chance of the first cut in

June.

U.S. two-year yields, which track short-term

interest rate expectations, rose in New York trade overnight

then fell 3.5 basis points in Asia trade to 4.59%.

In foreign exchange, Monday's rhetoric from Japan's top

currency diplomat, Masato Kanda, kept the yen steady as traders

weigh the risk of Japan buying heavily. Kanda said the yen's

recent slide was "strange" and "speculative".

The Bank of Japan (BOJ) lifted interest rates last week but

the yen has fallen near to three-decade lows on the dollar.

China's yuan opened steady after a stronger-than-expected

fixing of its trading band, but selling pressure soon drove it

to the weak side of its 200-day moving average at 7.2184 per

dollar.

Markets were unsettled by a sharp drop in the yuan on

Friday, after months of tight trading, and some speculate China

is loosening its grip on the currency to allow it to fall.

"Whether this reflects a shift in FX policy remains to be

seen but accommodative monetary conditions are necessary in the

face of growth headwinds," said BofA Securities' strategist

Adarsh Sinha.

"If (yuan) depreciation sustains and coincides with a weaker

credit impulse, Asia FX is vulnerable."

Later on Tuesday, U.S. manufacturing, services and consumer

confidence figures are due. U.S. core PCE data is due on Friday.

Gold and oil prices were broadly steady in commodities

trade, with spot gold at $2,172 an ounce and Brent crude

futures up 7 cents a barrel to $86.82.

Bitcoin hovered just above $70,000 after rising

sharply on Monday.

(Editing by Lincoln Feast.)